When making strategy decisions, there is always a risk of taking an inside-out view, i.e. one from the business perspective, a “how” mindset more concerned by feasibility. The opposite is an outside-in view, which looks at the situation through another person’s eyes – preferably those of the customers the business is trying to serve. This “why” mindset is similar to Steve Jobs’ when he asked people to do new thing without regard to how they would make it happen.
The tendency for business leaders to choose feasible ideas over their customers’ want of the most creative ideas can unintentionally limit growth, or make it harder to attain. More often than not, this results in ‘me-too-ism’ strategies, with companies competing without any real advantage - and ultimately leading to lower growth and profits.
When deriving winning strategies, staying in touch with the customers helps to be relevant even as the market changes. This forces companies to unhook themselves from assumptions about what they can do or how they should do it and, instead, to look at where the market landscape seems to be going. The intersection between what the company does well and what the customer needs therefore increase their effectiveness in the market.
After many years of growth, mostly through mergers and acquisitions, Hilton Worldwide realised that it was no longer competing in the marketplace as effectively as it could. It decided to re-center its business strategy around one of its core brand promises, namely ‘to ensure every guest feels cared for, valued, and respected’. It meant overhauling its business strategy through the eyes of specific customer segments which could grow both revenues and profits.
One of those segments of focus is that of the Millenials, which has very specific priorities when it comes to their travel budget. Interested in fashion and design, and completely wired for the internet age, they are putting the priority on the destination of their travels rather than the properties in which they stay. They want affordable, easy in-and-out no frills hotels with basics like free Wi-Fi and breakfast. Lifestyle becomes part of the experience: a cool room, a cool lobby where they can work and socialize and have a drink.
Hilton’s Hampton Inns have been linchpins within its lower cost portfolio. These are amenity-light hotels with “select service”, the hospitality industry’s answer to Airbnb. Specific requisites include a lap desk for guests who want to work from their beds; six or twelve towels, depending on the room type; two items of artwork, preferably by local artists; and a breakfast buffet with at least one local item. The same goes for the free snack at check-in for members of the rewards program. There is also a long bar table in the lounge area, which encourages guests to use the communal space and socialize (and not feel compelled to stay in their rooms).
Hilton franchisees’ work with local designers has led to some storied and stellar Hampton Inn properties, like the one in Austin, Texas, which exhibits a design features such a large graffiti mural in the two-floor lobby, old western-style chandeliers, and an intricate wrought iron balcony on which guests can sit and look out over the city skyline.
The Select Service hotels have not only made a real value play for the customers, with substantially improved room product, but also for the owners and operators. These hotels are relatively easy to build, cheap to operate, and are proving more profitable, with margins 500 to 1,500 basis points higher than typical full-service hotels. As a result, Select Service projects drive 50% of Hilton’s total deal pipeline for new builds in 2015.
Another pillar of Hilton Worldwide’s overhauled strategy is that of the overseas Chinese travelers. Hilton launched the Hilton Huanying (“Welcome”) program in 2011, a consistent set of amenities and services to meet the Chinese traveler’s unique needs and expectations when traveling abroad. Guests are greeted at the front desk by a Chinese-speaking team member, they can find an in-room welcome note written in simplified Chinese while their rooms are outfitted with amenities such as tea kettles, jasmine tea, slippers, Mandarin television channels, and a Chinese translation service. Special Chinese breakfast dishes include congee, fried rice, fried noodles, dim sum, hard boiled eggs, Chinese tea, soy milk and other items, including chopsticks covered in red wrapping.
All of the 10 hotel brands within the Hilton Worldwide portfolio can choose to participate in the program. This also represents an opportunity for them to build brand loyalty. The Huanying program is promoted to Chinese travelers staying at Hilton Worldwide properties throughout China. Huanying messages are pushed on WeChat, and on Weibo through partnerships with Chinese celebrities and brands, as well as through a dedicated Hilton Worldwide Chinese language website.
A new business strategy developed through the eyes of specific customer segments has helped Hilton Worldwide’s turnaround from “an average performer at best” to a more aligned and profitable company, with a portfolio of 10 brands that regularly outperform in their respective segments. It now operates more than 4,500 properties and 720,000 rooms in nearly 100 countries. As of September 2015, it had the largest pipeline in the lodging industry with approximately 260,000 rooms at 1,555 hotels throughout 85 countries, including 33 countries where Hilton Worldwide does not currently have any hotels.
by Christelle Espinasse – inSTRATEGIA
